Tariffs Uncertainty Headwind For Indian IT, Says Analyst Moshe Katri

The Indian IT companies with exposure to US markets may see an impact on growth due to a downsizing in large contracts amid the concerns of US tariffs, according to Moshe Katri, Managing Director of Equity Research at US-based Wedbush Securities.

The prevailing investor sentiment points to a more cautious outlook weighed down by US tariff concerns, though the Indian stock markets started 2025 with optimism, he suggested. In an interview with NDTV Profit on Monday, he noted that the IT sector is not immune to this trend.

Speaking to NDTV Profit, Katri highlighted that the initial expectations for a recovery in spending have been dampened by factors like Donald Trump-triggered tariff issues and patchy demand.

“We're in a tricky situation… We started the year with a euphoria, believing that we're going to have some sort of a go-back-to-normal spending environment. But the atmosphere has turned cautious due to tariff concerns, resulting in patchy demand. It seems that budgets have been approved, maybe with some delays, meaning the year is backloaded, especially for discretionary spending,” he said.

Katri highlighted that some companies, especially those focused on cost reduction or with strong Latin America exposure, are performing better than others. He pointed out that uncertainty surrounding tariffs is also a significant headwind for Indian IT companies, particularly in terms of large contracts.

“Uncertainty, especially around large contracts, has historically impacted spending decisions. The market doesn’t like uncertainty, and that’s why we’ve seen a massive correction in PE multiples year to date. It’s ironic because the budgets are here, but there’s still a lot of caution in spending them,” he explained.

Highlighting US tariffs as a key factor, he suggested that if these issues get resolved, it could lead to a positive turnaround for the industry. Katri acknowledged that the situation was dynamic, and if uncertainty persists for the next six months, it would likely impact growth.

“It's a very dynamic situation, and things can change quickly. In the past, negotiation tactics have worked, leading to agreements that eventually turn spending back on. That’s why it’s so confusing for many vendors on what to do in this environment,” the analyst said.

On investor sentiment, he explained that fear often creates buying opportunities, and the decision to invest depends on one's investment horizon and philosophy. He also acknowledged that the March quarter is “unlikely” to be strong, as it's typically a weak period for the industry.

"Post-March, visibility should improve as companies start providing fiscal year guidance. We’ll need to wait a couple of weeks to see where things are headed, but fear often creates buying opportunities,” he added.